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Recession is no time to stop innovating

As the effects of the downturn continue to materialise across all sectors of the economy, it’s clear that innovation will not be immune to the fallout of the global financial crisis. Here’s why the recession shouldn’t be used as an excuse to stop innovating.

With business and consumer confidence reaching new lows and financial pressure increasing, organisations both large and small will be tempted to put the brakes on investment in innovation. However, the continued commitment to innovation will in fact help businesses survive the recession and thrive when the economy recovers, which it inevitably will.

According to the World Intellectual Property Organisation (WIPO), whilst international patent filings grew under WIPO’s Patent Cooperation Treaty (PCT) by 2.4 percent in 2008, this rate of growth was significantly less than the average 9.3 percent growth rate seen in the previous three years. Anecdotally, IP Australia has also recently experienced a downturn in the number of Australian patent applications being filed and expects a 15 percent drop in the number of trade mark filings this year. In a downturn, especially when employers are still encouraged to retain jobs, investment in intellectual property (IP) becomes discretionary.

In an environment in which IP will either not be protected or will not be developed in the first place, the innovation pipeline will empty. This could stall the growth of innovation in Australia not only now, but for years to come, as the routine avenues of product development, proof of concept and scale up will virtually disappear.

Small businesses are often at the forefront of innovation as they develop new ways to tackle business challenges, so a lapse in innovation in the short term could threaten their competitive edge in the future. By investing more now to develop and protect IP, organisations could both protect and grow their revenue in the medium to long term. IP delivers competitive advantage by providing the ability to exclusively sell products and services at a price premium, and long term statistics show that more IP drives more innovation. On the other hand, overwhelming competition in the absence of IP drives prices down and leaves no commercial scope for differentiation in the marketplace.

In tight economic times, prudent decision-making can enable costs to be trimmed without loss of the IP farm. A clearly articulated corporate strategy, in alignment with regular IP portfolio reviews, can help ensure that only the most strategic IP is maintained. In addition, by properly resourcing the IP function, for example, penalty fees for late activity can be avoided, and full analysis of the competitive environment can be conducted before an investment is made, thereby eliminating the possibility of having to withdraw a ‘me too’ product at a later date.

According to Francis Gurry, the Australian Director General of WIPO, the reality is that “…economic crises have, in the past, been a catalyst for innovation as greater emphasis is placed on improving standards of efficiency, doing more with less and identifying and developing smarter business solutions. In the current economic climate, technology, innovation and creativity are critical in creating opportunities for economic renewal and addressing pressing global issues such as climate change.”

Despite the unprecedented economic challenges they face, businesses will benefit from committing time and resources to the development of new, innovative processes and technologies that will increase efficiency and productivity, not only within their business but also in the economy as whole.

The Federal Government has so far neglected the innovation sector in framing its economic stimulus packages and has provided limited motivation for businesses to remain committed to their own investment in innovation. In his letter to the Minister accompanying his 2008 report Venturous Australia¬—just as the credit crunch was impacting on offshore markets—Dr Terry Cutler wrote: “We are entering an era when the global economy is being transformed before our eyes, with huge local implications”.

In order to motivate businesses to invest in innovation to secure their competitive future and ultimately that of Australian innovation, Cutler recommended the following:

  • Support business innovation as an explicit priority for Australia’s innovation policy by incorporating objectives such as: extending the global reach and market access of Australian firms and fostering the capacity for innovation at the company level in response to market and consumer demands, into programs aimed at building business innovation capacity.
  • Extend the Enterprise Connect Program to include services firms and expand it to provide explicit business innovation services in conjunction with the existing business review and advisory strategy
  • Establish a new Knowledge Connections program within the Enterprise Connect Program, to work with the Industry Innovation Councils in facilitating new connections and clusters crucial to the competitive advantage of firms in knowledge-based economies.

The recession should not be used as an excuse to stop innovating.  Small businesses are often at the forefront of innovation and having a continued commitment to investing in innovation can actually help businesses survive tough economic times. So get innovating!

Karen Sinclair is President-Elect, Licensing Executives Society of Australia and New Zealand (www.lesanz.org.au).

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